PMLA can commence only if predicate offence is established, SC tells ED in Senthil Balaji case hearing

  • August 7, 2024
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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PMLA can commence only if predicate offence is established, SC tells ED in Senthil Balaji case hearing

Subject: Polity

Sec: Legislation in news

Context:

  • The Supreme Court asked the Directorate of Enforcement (ED) about the prospects of trial commencing in the money laundering case against former Tamil Nadu Minister V. Senthil Balaji without first establishing the predicate offence (cash for jobs).

More on News:

  • The Bench is hearing a plea for regular bail filed by Mr. Balaji, who said he had been in custody for over 300 days.
  • “But you will have to still address on whether there were any prospects of the PMLA trial commencing; if not, other considerations would come into play while dealing with the bail application,” the Bench weighed in.
  • The ED has accused Mr. Balaji of playing a “central and pivotal role” in the “job racket scam” during the period of 2014-2015. The case involves kickbacks for jobs in the Metropolitan Transport Corporation of Chennai and Tamil Nadu State Corporation when Balaji was the Transport Minister.
  • The Enforcement Case Information Report (ECIR) was based on three FIRs and a chargesheet filed by the Law Enforcement Agency of the Central Crime Branch of Chennai.

The Concept of Predicate Offence – The Supreme Court Clarifies:

  • The offence of money laundering, as per the definition in Black’s Law Dictionary is “the act of transferring illegally obtained money through legitimate people or accounts so that its original source cannot be traced”.
  • Assume that the money, if illegally obtained, must be obtained in relation to the commission of an underlying criminal offence.
  • The commission and requirement of this underlying offence, commonly known as a predicate offence, has been a point of debate since the introduction of the Prevention and Money Laundering Act, 2002.
  • The SC PMLA judgment lies in its categorical confirmation that if the predicate offence fails, then the prosecution under the Act cannot be continued by the Enforcement Directorate.
  • In fact, just ten days after the SC PMLA judgment , on August 8, 2022, an order was passed by a special Court under the Act granting interim bail to individuals in a money laundering case. Accordingly, it can be concluded that the judgment in the present matter specifically in relation to the concept of ‘predicate offence’ is a welcome move that will pave the way for the closure of many ongoing cases under the Act.

Ruling of the Supreme Court Regarding PMLA:

  • An accused could apply for bail under the regular provisions of the Code of Criminal Procedure (CrPC), and if so, whether such a bail plea would also have to satisfy the twin conditions under Section 45 of the
  • The court also deliberated on whether an accused not arrested during the PMLA investigation would have to meet the stringent PMLA bail conditions if they appear before the court after being summoned or having a warrant issued for their failure to appear.
  • SC Observations:
    • Status of Accused Appearing on Summons: If an accused appears before a designated special court pursuant to a summons, they cannot be treated as being in custody, and hence, they need not apply for bail under the stringent conditions posed by the PMLA.
      • The ED will have to separately apply for the custody of an accused after they appear in court, showing specific grounds necessitating custodial interrogation.
      • This presumption of liberty is a crucial step towards protecting the fundamental right of personal liberty.
    • Nature of Bonds/Sureties: The special court can direct the accused to provide a surety/guarantee (bonds)as per Section 88 of the Code of Criminal Procedure.
      • However, this surety is not the same as granting bail and does not require satisfying the stringent twin conditions of Section 45 of the PMLA.
    • Graded Arrest Procedure: If the accused fails to appear before the court despite being summoned, the special court can first issue a bailable warrant (where bail can be obtained).
      • If the accused still does not appear, the court can then issue a non-bailable warrant (arrest without bail).
    • Arresting Non-Accused Parties: The ED can still arrest an individual who is not named as an accused in the initial PMLA complaint.
      • However, to do so, the ED must follow the proper arrest procedures outlined in Section 19 of the PMLA.

Key Provisions of PMLA:

  • Offences and Penalties: PMLA defines money laundering offences and imposes penalties for such activities. It includes rigorous imprisonment and fines for offenders.
    • Money laundering is the process of converting illegally earned money into seemingly legal money.
  • Attachment and Confiscation of Property: The Act allows for the attachment and confiscation of property involved in money laundering. It provides for the establishment of an Adjudicating Authority to oversee these proceedings.
  • Reporting Requirements: PMLA mandates certain entities, such as banks and financial institutions, to maintain records of transactions and report suspicious transactions to the Financial Intelligence Unit (FIU).
  • Appellate Tribunal: Section 25 of PMLA provides for the establishment of an Appellate Tribunal, which is vested with power to hear appeals against orders passed by the Adjudicating Authority.
PMLA can commence only if predicate offence is established Polity